Texas firm with no-bid deal gave to Rendell

HARRISBURG - Around the time that his law firm was negotiating a potentially lucrative contract with the Rendell administration, a prominent Texas lawyer contributed heavily to the governor's 2006 reelection bid.

F. Kenneth Bailey's firm, Bailey, Perrin, Bailey of Houston, eventually landed a no-bid contract to represent the administration in a continuing case against a pharmaceutical company. That contract is now at the center of a legal fight involving allegations of pay-to-play politics.

The drugmaker - Janssen Pharmaceutica - is asking the Pennsylvania Supreme Court to force Rendell to dump the firm, whose founder, Bailey, gave the governor's campaign more than $91,000 in cash and airfare in 2006.

Janssen also alleges that the administration wrongly agreed to what it called an inappropriate "contingency" arrangement that allows the firm to profit if it wins and recoups expenses in the case.

In an interview last night, Rendell called the allegations ludicrous. He said he met Bailey in 2000, when Rendell chaired the Democratic National Committee, and that the Texas lawyer had been a supporter of his since.

Rendell also said he had a hard-and-fast rule since his days as Philadelphia mayor: If a law firm came to him and could convincingly demonstrate that a case was worthy of pursuing, that it could recover damages, and that it was qualified, he would consider hiring it.

The governor pointed out that Bailey proposed pursuing the case on the state's behalf and would not be paid "a dime of taxpayer money" unless he won the case for the state.

"There wasn't the slightest bit of pay-to-play here," Rendell said. "I never put a dime of state money in jeopardy for Ken Bailey."

Bailey could not be reached for comment yesterday. It is unclear when the Supreme Court will rule on the matter.

The drug company made a similar argument to have Bailey Perrin removed from the case in Philadelphia Court of Common Pleas last year and lost.

Janssen's suit, filed this year, does not specifically accuse Rendell of pay-to-play allegations. But it does point out that Bailey gave to Rendell in the months leading up to the August 2006 signing of the contract.

Between February and October 2006, Bailey gave Rendell $91,100. He also donated $25,000 to the Democratic Governor's Association that year, according to the lawsuit.

Combined, Janssen alleges in the lawsuit, the circumstances around the Bailey Perrin deal "give rise to a manifest appearance of impropriety - the impression that the government's prosecutorial decisions have already been infected by impermissible considerations."

In an interview yesterday, Janssen's lead attorney, Edward Posner, said: "There is an appearance of pay-to-play, but no one can prove there was a quid pro quo."

Bailey represents the state in a lawsuit against Janssen, a subsidiary of Johnson & Johnson, over its antipsychotic drug Risperdal. The state accuses the company of improperly marketing the drug for uses not authorized by the federal government. Janssen, based in Titusville, N.J., denies the allegations.

Pennsylvania seeks to recover expenses it paid for allegedly medically unnecessary prescriptions for Risperdal through its subsidized health programs for low-income and elderly residents.

Typically, the state attorney general would handle such legal work.

Rendell said he told Bailey when the lawyer proposed handling the case to seek approval from Attorney General Tom Corbett's office first.

Rendell said that he expected Corbett to select a lawyer to lead the Janssen suit but that Corbett's office kicked the decision back to the administration's Office of General Counsel.

"The [attorney general] had the power, if he thought it was a BS case, to say it won't go forward," Rendell said. "But he delegated it back to us."

Rendell spokesman Chuck Ardo added that Rendell did not participate in the selection process. That decision was made by the governor's Office of General Counsel.

Reached for comment yesterday, Kevin Harley, a spokesman for the Attorney General's Office, said the administration "came to us and said, 'We want to do this,' " and that Corbett's office did not object.

Harley could not say for certain how often the Rendell administration had asked to farm out legal cases. He did say that it was rare.

Bailey has never contributed to the campaigns of Corbett, who this year started his second and final term as attorney general and who is considering a GOP gubernatorial bid next year, according to campaign-finance records.

Under the contract, Bailey Perrin will receive up to 15 percent of any judgment made with the state. The contract stipulates that the state cannot accept a nonmonetary settlement unless the agreement "also provides reasonably" for Bailey's compensation.

Janssen argued in its appeal that such an arrangement was improper because Bailey had "a selfish interest" in the outcome of the case.

Asked about that assertion, Rendell said: "That's the way these class-action lawyers get paid. Welcome to the real world, Janssen."

Ardo added that such arrangements were "commonly used in other contracts."

Nonetheless, some Republican lawmakers quickly pounced on the contract as a textbook example of how politics and government intersect.

State Rep. Douglas Reichley (R., Lehigh) called it "the most recent example - but certainly not the last - of how pay-to-play has taken root in Harrisburg."

Reichley argued that there were plenty of Philadelphia firms Rendell could have selected to handle the case and that the governor didn't have to go out of state for lawyers. Reichley is one of the legislature's most vocal critics of the use of no-bid contracts in state government.

Another is Rep. Craig Dally.

"It's just yet another example of this pay-to-play mentality," said Dally (R., Northampton). "There is a nexis between those activities - campaign donations and the awarding of no-bid contracts."

For at least the last two legislative sessions, Dally has offered a bill that would give the House and Senate oversight of any contract of more than $500,000 for outside lawyers.